As Online Ads Look More Like News Articles, F.T.C. Warns Against Deception

What happens when advertising stops being obvious?

The Federal Trade Commission, charged with protecting consumers and guarding against deceptive advertising practices, acknowledges it does not know.

But faced with a growing wave of digital advertising that is intended to look like the news articles and features of the publications where they appear, the commission is warning advertisers that it intends to vigorously enforce its rules against misleading advertising.

The practice of what is now known as native advertising or sponsored content — and has been referred to as advertorial or infomercial — has grown more aggressive on the Internet. That is because companies and brands have the ability to target specific audiences and individuals and to get instant feedback when consumers react to what is being shown.

Bait and switch is as old as sales itself, and it has been subject to F.T.C. rules for nearly a century. But as door-to-door salesmen portraying themselves as opinion pollsters have given way to web pages made to look like unbiased magazine articles, consumer-protection officials have grown concerned that even information labeled advertising can mislead consumers.

“The delivery of relevant messages and cultivating user engagement are important goals, of course,” Edith Ramirez, the chairwoman of the F.T.C., said on Wednesday at a conference the agency conducted to discuss native advertising. Several hundred advertisers, academics and media executives were there to hear the message.

“That is the point of advertising, after all,” Ms. Ramirez added. “But it’s equally important that advertising not mislead consumers. By presenting ads that resemble editorial content, an advertiser risks implying, deceptively, that the information comes from a nonbiased source.”

F.T.C. officials said recent surveys on online publishers revealed that 73 percent offered native advertising opportunities on their sites and that an additional 17 percent were considering offering them this year. (The New York Times is among the publications that will begin the practice next year.) About 41 percent of brands and one-third of advertising agencies use such methods, they said.

Chris Laird, marketing director for brand operations at Procter & Gamble, said sponsored content allowed the company to “immediately measure the impact it is having on our business.”

Unlike advertisements in magazines or on television, online ads let a company know when a consumer downloads a coupon, posts a product review or goes to a shopping site and buys its product.

The F.T.C., interested in what drives consumer decisions, conducted a test with a panel of advertising and publishing experts. It showed them different models of sponsored content and asked whether each might be confusing or deceptive.

Is, for example, putting an advertisement in a shaded box enough of a distinction to warn consumers that they are being sold something? What if the box has a headline saying “sponsored content,” “sponsored by Dawn” or “brought to you by ...”?

It became clear throughout the day that advertisers and marketers were loath to label an “advertisement” as an ad. Robert Weissman, president of Public Citizen, a consumer advocacy group, said “the word ‘advertisement’ tells people what is being done to them.”

“The whole point of the word ‘sponsored’ is to avoid calling it what it is,” he said.

Jeff Johnson, who helps companies design user interfaces, said “sponsored by” messages confuse consumers because they are not clear on whether the advertiser played a role in the creation of the material or asked a publisher to create material that was compatible with a product.

Several publishers and website owners who use native advertising defended the practice, saying their readers were knowledgeable enough to understand how to distinguish promotion from newsroom content.

Tessa Gould, director of The Huffington Post’s native advertising studio, said prominent labels like “Presented by Sony” accompanied a recent article titled “The 8 Most Incredible Water Festivals You Need to Attend.” The article was specifically created by the site to help Sony promote its new waterproof tablet computer.

Not all examples are so clear cut. Jon Steinberg, president and chief operating officer of BuzzFeed, noted that companies could directly post articles that had marketing purposes to the BuzzFeed website. But because they are not paid placements, there is no commercial relationship.

“There is a distinction to be made between labeling something as an advertisement and telling the consumer who the content is from,” he said.

Sometimes the content originates with the same people who create the regular articles and headlines. Mashable.com uses its reporters and editors to create the advertising content. The publication’s technology journalists are regularly used to create advertising “because it allows us to go more in depth” in reporting, said Adam Ostrow, chief strategy officer for Mashable.

For a consumer, what is missing in a native advertisement is as important as what is included, said Michelle De Mooy, a senior associate at Consumer Action, an advocacy group. Sponsored content on a medical website that offers information about a drug to treat a disorder but that does not talk about cheaper alternative treatments affects a consumer beyond the perception of the site’s credibility.

But the F.T.C. has to answer crucial questions before it can come up with any solutions: Do consumers really care about the advertisements? And is there harm being done?

David J. Franklyn, a professor at the University of San Francisco law school, said preliminary results from his research showed that as many as 35 percent of the consumers in groups he has studied could not identify an advertisement even when it said “advertisement” on it. Roughly half, he said, indicated they did not know what the word “sponsored” meant.

Perhaps more important, he said, is that one-third of consumers say they do not care if something is an advertisement or is editorial material, and many would be more likely to click through to an item if they knew it was an ad.

That led Mr. Franklyn to ask: “So what are we protecting the consumer from?”